Online Exam 8
Question 1 0 / 5 points
Which of the statements below is true?
Investors want to maximize return and maximize risk.
Investors want to maximize return and minimize risk. (*This is correct)
Investors want to minimize return and maximize risk.
Investors want to minimize return and minimize risk.
Question 2 5 / 5 points
The practice of not putting all of your eggs in one basket is an illustration of:
Question 3 5 / 5 points
The security market line has:
a positive slope.
a negative slope.
a beta of 1.0.
Question 4 5 / 5 points
Given an expected market return of 12.0%, a beta of 0.75 for Benson Industries, and a risk-free rate of 4%, what is the expected return for Benson Industries?
Question 5 5 / 5 points
For most stocks, the correlation coefficient with other stocks is:
The distribution of correlation coefficients between stocks is uniform from -1.0 to +1.0.
Question 6 5 / 5 points
Stocks A, B, C, and D have standard deviations, respectively, of 20%, 5%, 10%, and 15%. Which one is the riskiest?
Question 7 5 / 5 points
Travis bought a share of stock for $31.50 that paid a dividend of $.85 and sold six months later for $27.65. What was his dollar profit or loss and holding period return?
Question 8 5 / 5 points
__________ may be defined as a measure of uncertainty in a set of potential outcomes for an event in which there is a chance for some loss.
Question 9 5 / 5 points
The __________ is the intercept on the security market line.
market rate of return
Question 10 5 / 5 points
Which of the following investments is considered to be default risk-free?
AAA-rated corporate bonds
Question 11 5 / 5 points
Correlation, a standardized measure of how stocks perform relative to one another in different states of the economy, has a range from:
0.0 to +10.0.
0.0 to +1.0.
-1.0 to +1.0.
There is no range; correlation is a calculated number that can take on any value.
Question 12 5 / 5 points
Jarvis bought a share of stock for $15.75 that paid a dividend of $.45 and sold three months later for $18.65. What was his dollar profit or loss and holding period return?
Question 13 5 / 5 points
Find the variance for a security that has three one-year returns of 5%, 10%, and 15%.
Question 14 5 / 5 points
Find the variance for a security that has three one-year returns of -5%, 15%, and 20%.
Question 15 5 / 5 points
Use the following table:
States of the Economy Probability of the State 3-Month T-Bill Large-Company Stock Small-Company Stock
Boom 0.3 4 10 30
Steady 0.5 4 5 20
Recession 0.2 4 0 10
What is the difference between the variances for large- and small-company stocks?
Question 16 5 / 5 points
The correlation coefficient, a measurement of the comovement between two variables, has what range?
From 0.0 to +10.0
From 0.0 to +1.0
From -1.0 to +10.0
From =1.0 to -1.0
Question 17 0 / 5 points
Stock A B C D
Expected Return 5% 5% 7% 6%
Standard Deviation 10% 12% 12% 11%
Which of the following statements is true?
A is a better investment than B.
B is a better investment than C.
C is a better investment than D.
D is a better investment than C.
Question 18 5 / 5 points
is also known as nondiversifiable risk.
can be diversified away.
is system-wide risk.
is equal to 2 times the systematic risk.
Question 19 5 / 5 points
Which of the following statements is true about variance?
Variance describes how spread out a set of numbers or values are around its mean or average.
Variance is essentially the variability from the average.
The larger the variance, the greater the dispersion.
All of the above statements are true.
Question 20 5 / 5 points
Assume the following information about the market and JumpMasters’ stock. JumpMasters’ beta = 1.50, the risk-free rate is 3.5%, the market risk premium is 10%. Using the SML, what is the expected return for JumpMasters’ stock?
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